Electronic Trade Documents Bill [Lords]

Alex Davies-Jones Excerpts

3rd reading
Monday 10th July 2023 Commons Chamber

[Alex Davies-Jones (Pontypridd) (Lab)]

It is a very rare thing in this place to have the pleasure and privilege of responding on behalf of the Opposition to a Bill that we wholeheartedly support. For that reason, I will keep my comments brief.

As we know, the Bill follows a report and recommendations by the Law Commission. As the Minister has said, it seeks to remove the current legal impediment to producing documents in electronic form, allowing them to be legally recognised in the same way as paper documents, provided that they meet certain tests. It also sets out provisions relating to how the change of medium between electronic and paper documents will work in practice. It is an incredibly important Bill, particularly in a post-Brexit world where substantial red tape is having significant consequences for our ability to trade with the rest of the world. Labour sees the Bill as going some way towards unlocking that red tape by hopefully speeding up those processes.

We all know that central to international trade is the moving of goods across borders in order to get them from the seller to the buyer. That process typically involves multiple actors, including those involved in transportation, insurance, finance and logistics. One trade finance transaction can typically involve around 20 entities, and between 10 and 20 paper documents totalling over 100 pages. In a transaction covered by a bill of lading, for example, it is common to find 50 sheets of paper in a package of shipping documents that must be exchanged between as many as 30 different parties.

Despite the size and sophistication of the international trade market, many of its processes and the laws underlying them are based on practices developed by merchants hundreds of years ago. In particular, international trade still relies to a large extent on a special category of document that entitles the holder to claim performance of the obligation recorded in that document, and to transfer the right to claim performance of that obligation by transferring physical possession of the actual document. That document is said to embody the obligation, which may be to deliver goods or to pay money, rather than to merely evidence it. For example, a bill of lading is a document used in the carriage of goods by sea that, when transferred to the buyer or any subsequent lawful holder, gives that holder constructive possession of the goods described in the bill and a right to claim delivery of them from the carrier. The law governing those documents is premised on the idea that they can be physically held, or “possessed”. Industries using those documents are therefore prevented by law from moving to a fully paperless process.

To give a sense of the enormous amount of paperwork that international trade generates, the world’s largest container ships can carry 24,000 twenty-foot containers at any one time on any one voyage. For each of those cargoes, paper transport documentation has to be produced. That documentation must be processed manually to go from the shipper of the goods to the ultimate buyer at the destination, sometimes through numerous intermediaries. The effect of the current law is that much of the documentation needs to be in hard physical copy. The Digital Container Shipping Association has estimated that 16 million original bills of lading were issued by ocean carriers in 2020, and that more than 99% of those were in paper form. The Minister does not need reminding of the significant environmental cost of that way of working.

For those reasons, we support the Bill in its entirety. We see it as a long-overdue reform that allows for the legal recognition of certain types of documents used in trade and trade finance in electronic form. That will mean that parties can finally use the law that currently applies to paper trade documents when transacting with electronic trade documents. It was great of the Minister to confirm in Committee that the Department for Business and Trade will manage this legislation. We were concerned about where responsibility would actually sit, given that the Bill was brought forward by the Department for Science, Innovation and Technology and the Law Commission. We recognise and welcome that clarification and I am grateful to the Minister for it.

Labour sees the Bill as a valuable tool in ensuring that the world of trade and commerce operates as smoothly and efficiently as possible, and that UK businesses are not disadvantaged in any way. Ultimately, that is what we all want to see.